HomeMy WebLinkAbout20142622.tiff SITE SPECIFIC DEVELOPMENT PLAN AND USE BY SPECIAL
REVIEW (USR) APPLICATION
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FOR PLANNING DEPARTMENT USE ATE RECEIVED: (Li: Lit I I it
RECEIPT#/AMOUNT# is_ __ CASE#ASSIGNEb: I, L a 4 t-(-CiCit�
APPLICATION RECEIVED BY 'I:\; '� PLANNER ASSIGNED: I� -!
0 9 5 7 2 0 1 0 0 0 0 4
Parcel Number 0 9 5 7 _ 2 0 _ 1 . 0 0 _ 0 0 6
(12 digit number-found on Tax I.D information,obtainable at the Weld County Assessor's Office, or www.co.weld.co.us)
22597 52NE4/E25E4 20-5-67
Legal Description PT N2NE4 20-5-67 LOT B REC EXEMPT RE-3901 (.53R) , Section 20 , Township 5 North, Range 67 West
A (158+75)
Zone District: /t , Total Acreage: 233 ac. , Flood Plain: ✓ M- , Geological Hazard: AJA ,
Airport Overlay District: /UA-
FEE OWNER(S) OF THE PROPERTY:
Name: Hankins Farms, LLC (Harlan Hankins, Manager)
Work Phone# 970-381-0516 Home Phone# Email hankinsfarm@aol.com
Address: 27001 WCR 17
Address:
City/State/Zip Code Johnstown, CO 80534
Name:
Work Phone# Home Phone# Email
Address:
Address:
City/State/Zip Code
Name:
Work Phone# Home Phone# Email
Address:
Address:
City/State/Zip Code
APPLICANT OR AUTHORIZED AGENT (See Below:Authorization must accompany applications signed by Authorized Agent)
Name: Hankins Entertainment, LLC (Darren Hankins, Manager)
Work Phone# 970-302-6223 Home Phone# Email darren@adrnln.com
Address: 943 N 7th St
Address:
City/State/Zip Code Johnstown. CO 80534
PROPOSED USE:
Hankins Entertainment, LLC is proposing to use the property owned by Hankins Farms, LLC located North of
Johnstown, CO for a temporary agri-tourism enterprise. Hankins Entertainment, LLC would host a fall festival
as the primary focus of this endeavor, but would offer other tourism and enterainment options as well.
I (We) hereby depose and state under penalties of perjury that all statements, proposals, and/or plans submitted
with or contained within the application are true and correct to the best of my (our)knowledge. Signatures of all
fee owners of property must sign this application. If an Authorized Agent signs, a letter of authorization from all
fee owners must be included with the application. If a corporation is the fee owner, notarized evidence must be
included indicatin t that the signatory has to legal authority to si n for the corporation.
1-c7 ,_o. ICY.-.___ q t y i /Si
Signature: Owner or Authorized Agent Date Signature: Owner or Authorized Agent Date
SITE SPECIFIC DEVELOPMENT PLAN AND USE BY SPECIAL
REVIEW (USR) QUESTIONNAIRE
1. Explain, in detail,the proposed use of the property
Hankins Entertainment, LLC is proposing to use the property owned by Hankins
Farms, LLC north of Johnstown, CO for a temporary Agri-tourism enterprise. The
purpose of this endeavor is to use the current resource of the land and location to
supplement the current agricultural based income. The current operation and use of
the property is growing and harvesting corn, barley and wheat.
Events would be scheduled throughout the Spring, Summer and Fall, but the
primary focus would be late September thru October and culminate with a corn
maze and pumpkin festival. Events would consist of agricultural activities and great
outdoor fun for the entire family. Some of these outdoor activities would include a
corn maze, paintball, haunted attractions, zip lines, local concerts to name just a few.
2. Explain how this proposal is consistent with the intent of the Weld County
Code, Chapter 22 of the Comprehensive Plan.
The proposed use of the property by Hankins Entertainment, LLC is consistent with
Weld County Code, Chapter 22 and we feel it is in-part,what was intended in the
Comprehensive plan; keep farming and farmland in production in Weld County. Our
hope is to share the great natural beauty of the land that the Hankins family has
treasured for more than a century now. We want to continue to be a viable part of
our ever-changing community and continue to harvest great rewards off the land.
As we expose and educate the next generation about our greatest resources, land
and water; our hope is to give a greater appreciation and understanding of the
history of this area through activities and outdoor fun.
3. Explain how this proposal is consistent with the intent of Weld County Code,
Chapter 23 (Zoning) and the zone district in which it is located.
The proposed event by Hankins Entertainment, LLC also parallels the intent of the
Weld County Code, Chapter 23. As stated in Article III, Zone Districts under
Agricultural Zone District, "Agricultural Zone District is established to maintain and
promote agriculture as an essential feature of the COUNTY. The A (Agricultural)
Zone District is intended to provide areas for the conduct of agricultural activities
and activities related to agriculture and agricultural production"
The use of the property on the proposed location would be very similar to the uses
at a county's fairgrounds or a guest farm. It brings both rural and non-agricultural
related people and families together in an agricultural setting. It is an extension of
day-to-day agriculture activities providing education and exposure about
agriculture in a fun and entertaining way. It gives visitors a greater appreciation and
understanding for agriculture in our area and how it relates to them.
4.What type of uses surround the site (explain how the proposed use is
consistent and compatible with surrounding land uses)
Land surrounding the proposed site is almost entirely agricultural at this time.
Crops such as dry land wheat, hay, corn, barley and pasture make up this area. The
proposed use is consistent with surrounding properties because it keeps the land in
farm production.Agri4ourism exposes individuals to farming and rural life and will
provide an alternative revenue sources for the farming operations.
5. Describe, in detail,the following:
a. Number of people who will use this site
250-500 per day during the week
500-1000 per day during the weekend
Total attendance per week of 1,500-2,000
b. Number of employees proposed to be employed at this site:
The estimated need of employees to operate the events and activities are:
5-10 temporary employees during summer events
10-50 temporary employees during fall events
1-2 Full time employees
c. Hours of operation
Late Spring Summer Months
Friday 5 pm -40 pm
Saturday 11 am -10 pm
Sunday Noon -6 pm
Late September thru October
Wednesday, Thursday 5 pm -9 pm
Friday 5 pm -40 pm
Saturday 11 am - 10 pm
Sunday Noon - 6 pm
d. Type and number of structures to be erected (built) on this site
There are no permanent"building"type structures proposed for this
site. The only permanent structures would be a zip line structure as
part of the activities during our fall event and a tower for staff to view
the corn maze.
e. Type and number of animals, if any,to be on this site
Hayrack rides - 4 possible horses used to pull the wagons
Trail rides -would consist of people brining their own horses; but
could consist of up to 25 horses
Barnyard Petting Zoo - No more than 3 of the following animals: beef
cow and calf, ewe sheep &lamb, ewe goat&kid, pigs, puppies,
miniature ponies, ducks, llama, chickens, cats/kittens
f. Kind of vehicles (type, size,wt.) that will access this site and how
often
Common passenger vehicles (cars, light trucks) ranging from 2500 to
8500 lbs.will access property at a maximum rate of 300 vehicles per
hour during peak hours of operation.All Terrain Vehicles (500-4200
lbs.) vehicles used for day-to-day operations around activities area.
g. Who will provide fire protection to the site?
Johnstown Fire Protection District
h. Water source on the property (both domestic and irrigation)
Little Thompson Water District provides domestic water to the farm
property.The Greeley-Loveland irrigation ditch runs along north side
of activities area through the months of June-August. An irrigation
pond filled via the Greeley-Loveland irrigation ditch is located to the
north of the activities area and is full June-August.Attached copy of
water bill.
i. Sewage disposal system on the property (existing and proposed)
All sewage will be disposed of through the use of'port-o-johns' units
and a regular service schedule. For detailed information refer to
Waste Handling Plan.Attached septic permit.
j. If storage or warehousing is proposed,what type of items will be
stored
No storage or warehousing is proposed for the site. Short-term
storage of pre-packaged food items is possible in preparation of
events taking place
6. Explain the proposed landscaping for the site. The landscaping shall be
separately submitted as a landscaping plan map as part of the application
submittal.
There are no proposed plans for landscaping on this site. The entrance road will
require maintenance and some paths throughout the events area with also require
some day to day maintenance.
7. Explain any proposed reclamation procedures when termination of the Use
by Special Review activity occurs.
All activities will cease around October 31 or shortly there after.At this time the
corn maze will be harvested for grain.All equipment used for activities will be
removed.Animals will be returned to their respective owners. Temporary buildings
for Admissions gate, Concessions and the like will be removed.All portable
restrooms will be removed.
8. Explain how the storm water drainage will be handled on the site
Storm water drainage on this site is very minimal as the activities and parking areas
sit on high ground and any excess water run-off will flow directly to sloughs and
away from the property with virtually no accumulation.
9. Explain how long it will take to construct this site and when construction
and landscaping is scheduled to begin.
It will take approximately 60 days to construct the zip lines, corn maze props,
parking area lighting, fencing, etc.
10. Explain where storage and/or stockpile of wastes will occur on this site.
There will be no storage or stockpiling of any wastes on this site. Portable restrooms
and trash removal will be on a regular service schedule for removal from units.
Please refer to waste handling plan for details.
11. Please list all proposed on-site and off-site improvements associated with
the use (example: landscaping, fencing, drainage,turn lanes, etc.) and a
timeline of when you will have each one of the improvements completed.
The current entrance road to the parking area will be expanded from 1 lane to 2
lanes, completion August 15t. Landscaping of activities area with trails, perimeter
fencing and light poles, completion August lst.
Planned Activities
Corn Maze
Thrill/Haunted Corn Maze
Tree Maze
Children's Bale Maze
Haunted Slough Tour
Live Music/Featured Concert
Paintball Courses
Mobile Paintball Tour
Zip Lines
Family Movie Nights
Hayrack Riders
Trail Rides
Helicopter Rides
Farm Animal Petting Zoo
Pumpkin Patch
Mechanical Bull
Laser Tag
Hay Bale Pyramid
Karaoke Stage
Corn, Egg and Pumpkin Cannons
Draft Horse Pulling Competition
Livestock and Dog Demonstrations
Farmer's Market
Mutton Busting (sheep riding)
Various Educational Agricultural Demonstrations
Roping Competitions
Food Venders
Vintage Plane Fly-overs/Air Show
Disc/Frisbee Golf
Giant Jump Pillow
Corn Games
Hot Air Balloon Launch Site
Various Kids Activities
Children's Playground
Children's Tree Houses
Pumpkin Launcher/Catapult
Barn/Pet Animal Races
Barrel Train
Corn Sand Box
Pedal Cars
Obstacle Course/Fun Runs
Ropes Course
Property Ingress/Egress
The following is the logistical and preparation plan for all traffic entering and exiting
the property.
-- Traffic entering the property will enter off of Weld Country Rd 17 on the
West side traveling from the North or South.We anticipate that 75% of traffic
will be entering the property coming from the North and about 25% of the
traffic will be entering the property coming from the South.
-- The entrance is located off of Weld County Rd 17, 1.2 miles South of Highway
34 or.8 miles North of Weld Country Rd 54. The property and entrance are
on the West side of county Rd 17.
-- There is a cattle guard placed at the entrance of the property for exiting
traffic.
-- The current access road is not paved. It is a dirt road with an aggregate
surface. The access road will be maintained at a minimum of 20 feet in width
for two- way traffic. For details of maintaining the surface and dust control,
please refer to the 'Dust Abatement Plan'.
-- Emergency Access to the property will utilize an alternative route that will be
unobstructed by traffic.This access is located to the North of the main
entrance. It allows for direct access to the north end of the activities area.
Please refer to the Site Map for location of road.
-- The Johnstown Fire Protection District was notified of the use of this road for
emergency access and they found no problems with this usage.
-- University Health Paramedics indicated that they would have no issue with
the emergency access location and Ingress if Johnstown Fire Protection
District had no issues with the access.
Parking
Information regarding the parking location, sizing and operations for all event
activities.
Primary Parking Area
-- Primary parking area will be approximately 2 acres in area. It will be located
on pastured ground, south of the activities area and .5 miles from Weld
County Rd 17. This will allow a staging area for vehicles coming off of WCR
17 waiting to park. Refer to Site Map for exact location.
-- To prevent dust, aisle lanes will be moistened with water daily to keep dust
at a minimum. Refer to Dust Abatement Plan for details.
-- A portion of primary parking area next to the entrance gate will be reserved
for handicapped drivers.
-- 2 acres of parking area will allow for approximately 230 vehicles (115 per
acre), under standard parking regulations (9x20 ft parking stalls and 24 ft
aisles). We anticipate that this will handle all parking needs of expected
average traffic. On heavy traffic situations the overflow parking area may be
needed.
-- Primary parking area will be illuminated by shielded lights.
-- For parking pattern please refer to Site Map.
Overflow Parking Area
-- Overflow parking with be directed to the West side of primary parking
location.
-- For parking pattern please refer to Site Map
Parking Staff
During times of operation,parking staff will be present to assist in the operation
of parking vehicles correctly and efficiently.
442\ Weld County Public Works Dept.
s - 1111 H Street ACCESS PERMIT
-o ,t,. �r ) P.O. Box 758
� B Q4- Greeley, CO 80632 APPLICATION FORM
</e V\I� Phone: (970)304-6496
Fax: (970)304-6497
Applicant Property Owner(If different than Applicant)
Name Darren Hankins Name Hankins Farms, LLC
Company Hankins Entertainment, LLC Address 27001 WCR 17
Address 27001 WCR 17 City Johnstown State CO Zip 80534
City Johnstown State CO Zip 80534 Phone 970-381-0516
Business Phone 970-302-6223 Fax
Fax 970-587-5015 E-mail
E-mail darren@adrnln.com A= Existing Access A= Proposed Access
Parcel Location &Sketch
The access is on WCR 1 7
Nearest Intersection: WCR 17 &WCR 54 WCR
Distance from Intersection North 3/4 of a mile
Parcel Number 095720100004 A
Section/Township/Range 20-5-67cc
u u
Is there an existing access to the propertynlYES NO 0 N 3 3
Number of Existing Accesses 1
Road Surface Type&Construction Information In
Asphalt n Gravel n Treated I I Other wcR 54
Culvert Size &Type None, runs to slough
Materials used to construct Access road base, gravel
Construction Start Date Finish Date
Proposed Use
®Temporary (Tracking Pad Required)/ $75 OSingle Residential/$75 ❑Industrial/$150
❑Small Commercial or Oil &Gas/$75 ['Large Commercial/$150 ❑Subdivision/$150
❑Field (Agriculture Only)/Exempt
Is this access associated with a Planning Process? HNo nUSR nRE nPUD nOther
Required Attached Documents
- Traffic Control Plan -Certificate of Insurance -Access Pictures (From the Left, Right, & into the access)
By accepting this permit,the undersigned Applicant, under penalty of perjury,verifies that they have received all pages of the permit
application;they have read and understand all of the permit requirements and provisions set forth on all pages;that they have the
authority to sign for and bind the Applicant, if the Applicant is a corporation or other entity;and that by virtue of their signature the
Applicant is bound by and agrees to comply with all said permit requirements and provisions,all Weld County ordinances,and state laws
regarding facilities construction.
Signature A_ _ _ Printed Name Darren P. Hankins Date 5 /1/- /
Approval or Denial will be issued in minimum of 5 days. Approved by
Waste Handling Plan
The following is the logistical plan of handling and disposing of all waste generated
by the activities area.
Garbage Plan
--- Waste company disposing all waste will be GSI (Gallegos Sanitation Inc)
1941 Heath Parkway Unit 2
Fort Collins, CO 80524
(970) 484-5556
GSI will be providing 3 yard dumpsters to temporarily dispose of garbage
--- No waste will be stored on site for any longer than 6 days, between service
stops
GSI will remove garbage collected with a 1 time weekly service schedule
--- Daily garbage collection will utilize a minimum for 12 - 50 gallon size trash
bins with plastic liners, distributed about the entire property
--- All trash bins will be serviced &collected daily on an 'as needed' basis
--- There will be a circulating staff that collects garbage from trash bins on a
regular basis, several times daily 'as needed'
--- At the end of every day the garbage staff will collect any garbage or debris
that may be left in activities area or parking are during the duration of the
day
--- There will be trash bins located at the entrance and exit of the corn maze, but
not located within the actual maze. Garbage or debris that may be discarded
within the maze will be collected by the garbage staff that circulates the
property.
Sanitary/Septic Waste Plan
--- Waste company disposing of waste is GSI (Gallegos Sanitation Inc)
1941 Heath Parkway Unit 2
Fort Collins, CO 80524
(970) 484-5556
GSI will be providing the adequate number of portable units needed, as per
their calculations on attendance and duration on site.
--- Service schedule of units on site will be determined per USS calculations on
attendance and duration,with a minimum of once a week service regardless
of usage
--- There will be a circulating staff designated to monitor portable restroom
usage that will maintain adequate needs such as toilet paper, hand sanitizer,
cleanliness of units and had washing stations.
--- Hand sanitizer will be located inside each portable restroom unit as well as 1
centrally located sanitizer station within the vicinity of the restrooms
--- A portable hand washing station operated by water will be located in the
vicinity of the petting zoo, specifically for cleanup after touching and being
around animals
--- One portable restroom will be ADA accessible and will be positioned in a
location that a handicapped individual can easily access the unit
--- In the event that restroom usage could exceed anticipated calculations, USS is
available to service units upon request 7 days of the week
Animal Waste
--- Petting Zoo animal pens will be cleaned daily of any waste and used as
fertilizer in farming operations or disposed of in a dumpster.
Fuel Storage
---There will be no fuel for ATV's or any other equipment stored on-site.
Dust Abatement Plan
Road Surface
-- The road surface entering the property from the East is a dirt road with an
aggregate surface
-- A tracking pad consisting of a cattle guard and recycled base will minimize
any tracking of mud and rocks on CR 17 in the event of moisture
-- Prior to event traffic arriving the road surface will be maintained to ensure
there is aggregate on the road to provide traction in the event of rain or
moisture
-- The road surface will be moistened with water and a magnesium chloride
product to minimize dust. It will be applied as needed throughout the entire
event as the road surface changes due to traffic or weather conditions
-- Application of water and chemicals will be done with a pull behind spray
type applicator
Parking Area
-- The primary parking area is pasture land just to the south of the activities
area
-- The parking aisles in the pasture will be moistened with water to minimize
dust prior to the event each day and throughout the event as needed
-- Handicapped parking will be designated at the northern end of the parking
area, providing close and easy access to the event area entrance.
-- Application of water will be done with a pull behind spray type applicator
Activities Area
-- The activities area is pasture land. In the event that excessive foot traffic
creates soil fines capable of becoming airborne dust particles, water will be
applied to the area
-- The activities area will be monitored throughout each day for dust control
-- Application of water will be done with a spray type applicator or sprayer
mounted to an ATV
Noise Control Plan
The logistical plan for monitoring and controlling noise created by the activities
area.
-- The sources of sound originating from the activities area that may reach
excessive levels are the following: live music concert, recorded music or thrill
portion of corn maze with sound effects
-- All live music played will be from a temporary stage. The temporary stage
will be setup in a low-lying area and the sound will be directed to the
northwest. If it is deemed necessary, hay bails or sound absorbing wall
panels similar to those used by the oil and gas industry will be placed at the
top of the ravine to mitigate noise levels
-- Recorded music may be played around the activities area but at a level that is
adequate for a small localized area
-- The thrill portion of the corn maze will have props and sound effects within
the maze. These effects being located in the corn maze will significantly
distort and absorb the sound to prevent it from carry very far beyond the
maze
-- Periodically during operation hours, staff will monitor sound levels from a
distance to determine if further action to dampen or redirect sound is needed
Water Features
-- The Greeley/Loveland ditch runs through the property to the North of the
activities area.
-- Irrigation holding pond is located to the south of the Greeley/Loveland ditch
and the North of the activities area.
-- A slough with minimal water runs down the middle of the activities area and
on either side of the parking area.
Drainage Plan
-- The entrance road between Weld County Road 17 and the parking area is
equipped with 15" metal culverts that move any excess water down the
pasture and into a slough that continues south on the property
-- The parking area sits to the south of the activities area on pasture that slopes
to the East,West and South.All excess water drains into the sloughs that run
to the south on the property.
-- The activities area is divided by a slough that runs North-to—South. Excess
water runs towards the slough accordingly and away from activities area.
-- No flood zone is located on the property and there has not been any previous
drainage problems.
Temporary Structures
The following is a list of temporary structures proposed for use during the 2014
event season. There are no proposed permanent structures at this time.
-- Admission Office/Booth
-- Concessions booths (3) located in different areas of the activities areas
- Karaoke/Concert Stage
-- Large Outdoor Event Tent
-- Children's Playground Equipment/Tree Houses
-- Zip Line Attraction (pending design requirements, structure may need to be
permanent)
Gas Well Locations
All oil and natural gas wells on site property are operated by PDC Energy
-- Hankins 42-20
o Lat 40.387701
o Long 104.910400
-- Hankins 4
o Lat 40.390878
o Long 104.913831
-- Hankins 5
o Lat 40.387157
a Long 104.914360
Signage
-- One 16 square foot sign to be placed on parcel 095720100004 along Weld
County Rd 17 to assist with the navigation into the property.
-- One 16 square foot sign to be placed on parcel 095720100006 along Weld
County Rd 17 near entrance to assist with the navigation into the property.
Emergency Services
Information regarding emergency medical and fire protection for area activities.
Fire Protection
Fire protection will be provided by Johnstown Fire Protection District in the event
that fire protection is needed.
Emergency Access to corn maze, tree maze and activities area is available by a
alternative entrance to the property that will be completely unobstructed by traffic.
There will be a PA system that can be heard in the activities area and corn maze, so
that in the event of an emergency, public announcements can be made to attendees
A people count will be done for customers entering and exiting the corn maze, so
that in an emergency event the number of people located in the corn maze is know
and can be given to emergency personnel.
An identified and un-obstructed area 100 ft x 100 ft will be available in the event
that a medical emergency requires a medical helicopter to land on-site. Refer to Site
Map for location.
Medical Care
Emergency medical care will be provided by University Health Paramedics, in the
event that emergency medical attention is needed
On-site first aid medical care will be offered complimentary to guests for minor cuts,
scrapes and bandages. Weather permitting this care will be offered in the activities
area, beneath an identified tent.
Emergency Access to corn maze, tree maze and activities area is available by a
alternative entrance to the property that will be completely unobstructed by traffic
Hand washing stations with hand sanitizer and stations with fresh water will be on--
site for guests to dean any minor cuts and scrapes as they would like
Food and beverage concessions will be available during all open hours to the public.
In the event of severe heat or dehydration, complimentary water will be available at
the on-site first aid station
There will be a PA system that can be heard in the activities area and corn maze, so
that in the event of an emergency, public announcements can be made to attendees
A people count will be done for customers entering and exiting the corn maze, so
that in an emergency event the number of people located in the corn maze is know
and can be given to emergency personnel.
An identified and un-obstructed area 100 ft x 100 ft will be available in the event
that a medical emergency requires a medical helicopter to land on-site. Refer to Site
Map for location.
OPERATING AGREEMENT
OF
HANKINS FARMS, LLC
Effective as of December 6, 2006.
19844723
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS 1
1.1 DEFINITIONS 1
ARTICLE 2 FORMATION OF COMPANY 3
2.1 FORMATION 3
2.2 NAME 3
2.3 PRINCIPAL PLACE OF BUSINESS 3
2.4 REGISTERED OFFICE AND REGISTERED AGENT 4
2.5 TERM 4
ARTICLE 3 PERMITTED BUSINESS OF COMPANY 4
3.1 BUSINESS PURPOSE 4
ARTICLE 4 NAMES, ADDRESSES, AND CLASSES OF MEMBERS 5
4.1 MEMBERS 5
4.2 ADDITIONAL MEMBERS 5
4.3 CLASSES OF MEMBERS 5
ARTICLE 5 RIGHTS AND DUTIES OF MANAGERS 5
5.1 MANAGEMENT 5
5.2 NUMBER, TENURE AND QUALIFICATIONS 6
5.3 DECISIONS AND ACTIONS RESERVED TO THE MEMBERS 6
5.4 DUTIES OF MANAGER 7
5.5 MANAGER HAS/HAVE No EXCLUSIVE DUTY TO COMPANY 8
5.6 RESIGNATION 8
5.7 REMOVAL 8
5.8 VACANCIES 8
5.9 COMPENSATION; REIMBURSEMENT 9
ARTICLE 6 RIGHTS AND OBLIGATIONS OF MEMBERS 9
6.1 COMPANY DEBT LIABILITY 9
6.2 LOANS TO COMPANY 9
6.3 LIST OF MEMBERS 9
6.4 APPROVAL OF SALE OF ALL ASSETS 9
6.5 COMPANY BOOKS 10
6.6 PRIORITY AND RETURN OF CAPITAL 10
6.7 CERTIFICATES OF INTEREST 10
1984472.3
6.8 MEETINGS OF MEMBERS 10
6.9 CESSATION OF MEMBERSHIP 11
ARTICLE 7 CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS 12
7.1 MEMBERS' CAPITAL CONTRIBUTIONS 12
7.2 VALUE 12
7.3 CAPITAL ACCOUNTS 12
7.4 WITHDRAWAL OR REDUCTION OF MEMBERS' CONTRIBUTIONS TO CAPITAL 13
7.5 INTEREST ON AND RETURN OF CAPITAL CONTRIBUTIONS 14
7.6 ADDITIONAL CAPITAL CONTRIBUTIONS 14
ARTICLE 8 ALLOCATIONS,DISTRIBUTIONS,INCOME TAX ELECTIONS AND
REPORTS 14
8.1 ALLOCATIONS OF ITEMS 14
8.2 DISTRIBUTIONS 15
8.3 LIMITATION UPON DISTRIBUTIONS 15
8.4 SPECIAL ALLOCATION PROVISIONS 15
ARTICLE 9 RESTRICTIONS ON TRANSFERABILITY 18
9.1 RESTRICTIONS 18
9.2 CREATION OF OPTION 19
9.3 OPTIONS 20
9.4 ALL OR NONE OPTION EXERCISE 20
9.5 FAILURE TO EXERCISE ALL OPTIONS 20
9.6 MEMBER NOTICE 21
9.7 PURCHASE PRICE 22
9.8 PAYMENT 22
9.9 INTERESTS DELIVERED UNENCUMBERED 23
9.10 EXERCISE AND NONEXERCISE OF OPTION 23
ARTICLE 10 ADDITIONAL MEMBERS 24
ARTICLE 11 DISSOLUTION AND TERMINATION 24
11.1 DISSOLUTION 24
11.2 EFFECT OF FILING OF DISSOLVING STATEMENT 25
11.3 WINDING UP,LIQUIDATION AND DISTRIBUTION OF ASSETS 25
11.4 RETURN OF CONTRIBUTION NON-RECOURSE TO OTHER MEMBERS 26
ARTICLE 12 MISCELLANEOUS PROVISIONS 26
12.1 INDEMNIFICATION 26
12.2 NOTICES 27
12.3 BOOKS OF ACCOUNT AND RECORDS 27
12.4 ACCOUNTING PERIOD 27
12.5 RECORDS,AUDITS AND REPORTS 27
12.6 TAXED AS A PARTNERSHIP,TAX RETURNS AND OTHER ELECTIONS 28
12.7 APPLICATION OF COLORADO LAW 28
11
1984472.3
12.8 WAIVER OF ACTION FOR PARTITION 28
12.9 AMENDMENTS 28
12A0 EXECUTION OF ADDITIONAL INSTRUMENTS 29
12.11 CONSTRUCTION 29
12.12 HEADINGS 29
12.13 WAIVERS 29
12.14 RIGHTS AND REMEDIES CUMULATIVE 29
12.15 SEVERABILITY 29
12.16 HEIRS, SUCCESSORS AND ASSIGNS 29
12.17 CREDITORS 30
12.18 COUNTERPARTS 30
12.19 INVESTMENT REPRESENTATIONS 30
11i
1984472.3
OPERATING AGREEMENT OF
HANKINS FARMS, LLC
(a Colorado Limited Liability Company)
THIS OPERATING AGREEMENT is entered into and effective as of December 6,2006,by,
between, and among those persons executing this Operating Agreement and Exhibit A hereto,and
those other parties who from time to time execute this Operating Agreement or counterparts hereof
as members and whose names are listed on an exhibit to this Operating Agreement and those other
parties who comply with any other conditions for becoming a member as set forth herein and are
recorded as a member in the minutes and records of this limited liability company.
NOW, THEREFORE, in consideration of the premises and the terms and conditions
hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. The following terms used in this Operating Agreement shall have the
following meanings (unless otherwise expressly provided herein):
(a) "Additional Member"shall mean any Person or Entity who or which is admitted
to the Company as an Additional Member pursuant to Article 10 of this Operating Agreement.
(b) "Affiliate" means, with respect to any Person, (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person, (ii) any Person
owning or controlling ten percent(10%)or more of the outstanding voting interests of such Person,
(iii) any officer, director, manager, member or general partner of such Person, or (iv) any Person
who is an officer, director, general partner, trustee, or holder of ten percent(10%) or more of the
voting interests of any Person described in clauses (i)through(iii)of this sentence. For purposes
of this definition,the term"controls,""is controlled by,"or"is under common control with"shall
mean the possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of a person or entity,whether through the ownership of voting securities,
by contract or otherwise.
(c) "Capital Account"as of any given date shall mean the Capital Contribution to
the Company by a Member as adjusted pursuant to Article 7.
(d) "Capital Contribution" shall mean any contribution to the capital of the
Company in cash, property,services rendered or a promissory note or other obligation to contribute
cash or property or to perform services by a Member whenever made. "Initial Capital
Contribution" shall mean the initial contribution to the capital of the Company pursuant to this
Operating Agreement.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended, or
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1984472.3
corresponding provisions of subsequent superseding federal revenue laws.
(f) "Colorado Act" shall mean the Colorado Limited Liability Company Act, as
amended.
(g) "Company" shall refer to Hankins Farms, LLC.
(h) "Distributable Cash" means all cash, revenues and funds received by the
Company from Company operations, less the sum of the following to the extent paid or set aside
by the Company: (i) all principal and interest payments on indebtedness of the Company and all
other sums paid to lenders; (ii)all cash expenditures incurred incident to the normal operation of
the Company's business; and (iv)such cash reserves as the Manager deems reasonably necessary
to the proper operation of the Company's business.
(i) "Economic Interest Owner" is the purchaser, transferee or assignee of a
Member's Interest that was not approved as a Substitute Member pursuant to Paragraph 9.1 hereof,
or a Member that has ceased to be a Member due to an event of withdrawal, not involving the
transfer of a Member's Interest.
(j) "Entity"shall mean any general partnership,limited partnership,limited liability
company, corporation,joint venture, trust, business trust, cooperative or association.
(k) "Fiscal Year" means the Company's Fiscal Year,which shall be the calendar
year.
(1) "Interest"shall mean with respect to any Member, such Member's interest in
the Company as determined under this Operating Agreement.
(m) "Manager or Managers" shall mean one or more managers. Specifically,
Manager shall mean Harlan W. Hankins and any other Persons or Entity that succeeds said
Manager in that capacity.
(n) "Member" shall mean each of the parties who executes a counterpart of this
Operating Agreement as a Member and each of the parties who may hereafter become Additional
or Substituted Members and each of the parties who may hereafter become a Member without
executing this Operating Agreement,when such party's admission is reflected in the records of the
Company.The term"Member" shall also be deemed to include any individual who holds title to
his or her Interest in the Company through a revocable inter vivos trust. (For example,the death of
such individual would constitute the death of a Member for the purposes of this Operating
Agreement.) To the extent a Manager has purchased Interests in the Company,such Manager will
have all the rights of a Member with respect to such Interests, and the term "Member" as used
herein shall include a Manager to the extent such Manager has purchased such Interests in the
Company.
(o) "Operating Agreement" shall mean this Operating Agreement as originally
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executed and as amended from time to time.
(p) "P&L Percentage" shall mean each Member's share of each item of income,
gain, loss, deduction, and credit as set forth on Exhibit A of this Operating Agreement, as
amended.
(q) "Person" shall mean any individual or Entity, and the heirs, executors,
administrators, legal representatives,successors,and assigns of such Person where the context so
permits.
(r) "Selling Member"shall mean any Member which sells,assigns,hypothecates,
pledges or otherwise transfers all or any portion of its rights of membership in the Company,
including both economic and voting rights.
(s) "Substitute Member"shall mean any Person or Entity who or which is admitted
to the Company with all the rights of a Member who has sold,transferred or assigned their interest
in the Company to such Person or Entity, with the approval of the Members of the Company
pursuant to Article 9 of this Operating Agreement.
(t) "Tax Matters Partner" shall initially be the following Member, Harlan P.
Hankins, who shall serve as the initial "tax matters partner" for the Company, as defined by the
Code, until a successor is selected by the Manager.
(u) "Voting Percentage"shall mean the percentage of votes of each Member as set
forth on Exhibit A of this Operating Agreement.
ARTICLE 2
FORMATION OF COMPANY
2.1 Formation. The Articles of Organization and this Operating Agreement are hereby
adopted by and between the undersigned Members of Hankins Farms,LLC,organized as a Colorado
Limited Liability Company under and pursuant to the Colorado Act, as of the effective date first
written above.
2.2 Name. The name of the Company is Hankins Farms, LLC.
2.3 Principal Place of Business. The principal place of business of the Company within
the State of Colorado shall be c/0 Harlan P. Hankins, 26997 Weld County Rd 17, Johnstown, CO
80534. The Company may locate its places of business and registered office at any other place or
places as the Manager may from time to time deem advisable.
2.4 Registered Office and Registered Agent. The registered agent for the service of
process and the registered office shall be that person and location reflected in the Articles of
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Organization as filed in the office of the Colorado Secretary of State. The Members,may,from time
to time,change the registered agent or office through appropriate filings with the Colorado Secretary
of State.
2.5 Term. The term of the Company shall commence as of the filing date of the Articles
of Organization and shall exist in perpetuity,unless the Company is earlier dissolved in accordance
with either the provisions of this Operating Agreement or the Colorado Act.
ARTICLE 3
PERMITTED BUSINESS OF COMPANY
3.1 Business Purpose. The business of the Company shall be:
(a) To provide formal management of family farming operations, to establish
reasonable compensation for the Managers,to provide a succession plan that allows family farming
business to continue operations intergenerationally, to establish a method by which annual gifts
may be made without fractionalizing farm assets, to continue the ownership of family assets and
restrict non-family persons from acquiring family assets, to provide protection to family assets
from future creditor claims against family members, to promote the family's knowledge of and
communication about family assets, and provide limited liability for Members;
(b) To accomplish any lawful business whatsoever, or which shall at any time
appear conducive to or expedient for the protection or benefit of the Company and its assets;
(c) To exercise all other powers necessary to or reasonably connected with the
Company's business which may be legally exercised by limited liability companies under the
Colorado Act and the Company's Articles of Organization; and
(d) To engage in all activities necessary,customary,convenient,or incident to any
of the foregoing.
ARTICLE 4
NAMES, ADDRESSES, AND CLASSES OF MEMBERS
4.1 Members. The names and addresses of the initial Members are as follows:
Harlan P. Hankins
27001 Weld County Road 17
Johnstown, CO 80534
Harlan W. Hankins
27001 Weld County Road 17
Johnstown, CO 80534
4.2 Additional Members. Additional Members may be admitted in accordance with
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Article 10.
4.3 Classes of Members. There shall be two (2) classes of Members in the Company:
Class A Members and Class B Members. The relative rights and privileges of each Class of
Members shall be as follows:
(a) Class A Members shall hold an Interest in Company with all rights and
privileges thereto and shall have the right to vote on any matter provided for herein or by law. The
initial Class A Members shall be as set forth on Exhibit A ("Class A Membership Interest").
(b) Class B Members shall hold an Interest in the Company with the same rights
and privileges as the Class A Members except that Class B Members shall have no right to vote on
any matter relating to the Company except as may be specifically provided hereunder. The initial
Class B Members shall be as set forth on Exhibit A ("Class B Membership Interest").
(c) Members may own interests in both Class A Membership Interests and Class
B Membership Interests; however, Members who own interests only Class B Membership Interests
shall have no right to vote upon any matters and shall have no right to participate in the management
of the Company.
ARTICLE 5
RIGHTS AND DUTIES OF MANAGERS
5.1 Management. The day-to-day affairs of the Company within the ordinary course of
business shall be managed by its designated Manager. The Manager shall direct, manage, and
control the day-to-day affairs of the Company to the best of his ability and shall have the authority,
power,and discretion to make decisions and take actions in the ordinary course of business and to do
those things within the authority of the Manager,as delegated by the Members. For purposes hereof,
"ordinary course of business," shall mean those decisions and actions which are routine and
customary and which are not reasonably expected to have a substantial and material effect upon the
Company. If the Company has more than one Manager, any single Manager can act without the
consent of the other Manager or Managers.
5.2 Number,Tenure and Qualifications. The initial Manager shall be Harlan W.Hankins.
The number of Managers of the Company shall be fixed from time to time by resolution of the
Members holding the majority of the Voting Percentage of the Company,but in no event shall there
be less than one Manager. Each Manager shall hold office until the next annual meeting of Members
or until such Manager's successor shall have been elected and qualified, or until the Manager is
removed in accordance with Paragraph 5.7 hereof.
5.3 Decisions and Actions Reserved to the Members. Notwithstanding anything said
herein to the contrary, the following decisions or actions shall be made or taken by, or at the
direction of, the Members holding a majority of the Voting Percentage:
(a) Require additional capital contributions from the Members;
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1984472.3
(b) Adopt the annual capital or operating budget of the Company;
(c) Incur or create any indebtedness,either directly or indirectly,through a guaranty
(other than a refinancing of existing indebtedness), in any one transaction or a series of
transactions, other than in the ordinary course of business;
(d) Make capital expenditures or commitments for capital expenditures by the
Company outside the ordinary course of business;
(e) Authorize the sale, exchange, lease, assignment or other transfer of any assets
where such transaction is not in the ordinary course of business, but in any event where such
transaction is more than fifty percent(50%) of the total assets of the Company;
(f) Dissolve the Company;
(g) Terminate the business of the Company;
(h) Pledge or encumber any assets of the Company other than in the ordinary course
of business;
(i) Acquire property from any Person or Entity not in the ordinary course of
business. The fact that a Manager or Member is directly or indirectly affiliated or connected with
any such Person or Entity shall not prohibit the Company from dealing with that Person or Entity,
provided that full disclosure of the relationship is made to the Manager or other Members as the
case may be;
6) Borrow money from the Company,from banks or other lending institutions,or
from the Members or Affiliates of the Members;
(k) Make long term investment decisions; or
(1) Make any other decision or take any action which is reasonably expected to
have a substantial or material effect upon the Company as contrasted with a decision or action that
would be considered routine or in the ordinary course of business.
5.4 Duties of Manager. Without limiting the generality of Paragraph 5.1, the Manager
shall have the power and authority and shall conduct, or cause to be conducted the following, on
behalf of the Company:
(a) Manage farming operations including, but not limited to, the planting,
production, harvesting, and marketing of crops;
(b) Maintain compliance with all government programs;
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1984472.3
(c) Supervise all labor;
(d) Purchase liability and other insurance to protect the Company's property and
business;
(e) Invest any Company funds temporarily(by way of example but not limitation)
in time deposits, short-term governmental obligations, commercial paper or other investments;
(f) Execute and deliver on behalf of the Company instruments and documents in
the ordinary course of business, including, without limitation, checks, drafts, notes and other
negotiable instruments, mortgages or deeds of trust, security agreements, financing statements,
documents providing for the acquisition, mortgage or disposition of the Company's property,
assignments,bills of sale, leases,partnership agreements,and any other instruments or documents
necessary to the Company in the ordinary course of business. Manager shall have the power to
designate the Company's primary bank;
(g) Keep all books of account and other records of the Company;
(h) Pay all debts and other obligations of the Company,to the extent the funds of
the Company are available therefore;
(i) Maintain all funds of the Company held by the Manager in accounts in any bank
or banks designated by the Manager and make deposits thereto and withdrawals therefrom;
(j) Make distributions periodically to the Members in accordance with the
provisions of this Operating Agreement; and
(k) Generally perform all other acts as may be necessary or appropriate in managing
agricultural assets.
Unless authorized to do so by this Operating Agreement or by the Manager of the Company,
no agent or employee of the Company shall have any power or authority to bind the Company in any
way, to pledge its credit or render it liable pecuniarily for any purpose.
5.5 Manager Has/Have No Exclusive Duty to Company. The Manager shall not be
required to manage the Company as a sole and exclusive function and may have other business
interests and may engage in other activities in addition to those relating to the Company;provided,
however, the Manager shall agree to devote such time and effort to the business as is practicable,
depending upon the specific circumstances surrounding the Company's business.
5.6 Resignation. Any Manager of the Company may resign at any time by giving written
notice to another Manager or the Members of the Company. The resignation of any Manager shall
take effect upon receipt of notice thereof or at such later time as shall be specified in such notice;
and, unless otherwise specified therein,the acceptance of such resignation shall not be necessary to
make it effective.
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5.7 Removal. Notwithstanding Paragraph 5.2 hereof, at a meeting called expressly for
that purpose, all or any lesser number of Managers may be removed at any time, with or without
cause, by the affirmative vote of Members holding a majority of the Voting Percentage of the
Company.
5.8 Vacancies. Any vacancy occurring for any reason in the number of Managers of the
Company may be filled by the remaining Manager or Managers;or in the event that there is only one
(1)Manager of the Company prior to the vacancy,then by the affirmative vote of Members holding a
majority of the Voting Percentage of the Company. A Manager elected to fill a vacancy shall be
elected for the unexpired term of such Manager's predecessor in office and shall hold office until the
expiration of such term and until such Manager's successor shall be elected and shall qualify or until
such Manager's earlier death,resignation,or removal. A Manager chosen to fill a position resulting
from an increase in the number of Managers shall hold office until the next annual meeting of
Members and until its successor shall be elected and shall qualify, or until its earlier death,
resignation or removal.
5.9 Compensation;Reimbursement. The Manager maybe paid a management fee by the
Company for services in managing the business of the Company. Any fee paid to the Manager shall
be in an amount which is competitive and reasonable in comparison to fees paid for the rendering of
similar services in the metropolitan area where the Company's business is located. The Manager
shall be entitled to payment by or reimbursement from the Company of any and all reasonable out-
of-pocket expenses incurred by him for or on behalf of the Company.
ARTICLE 6
RIGHTS AND OBLIGATIONS OF MEMBERS
6.1 Company Debt Liability. A Member will not personally be liable for any debts or
losses of the Company beyond such Member's respective Capital Contributions,except as otherwise
required by law.
6.2 Loans to Company. Nothing in this Operating Agreement shall prevent any Member
from making secured or unsecured loans to the Company by agreement with the Company.
6.3 List of Members. Upon written request of any Member,the Manager shall provide a
list showing the names, addresses, and interests of all Members in the Company.
6.4 Approval of Sale of All Assets. The Members shall have the right,by the affirmative
vote of the Members holding at least a majority of the Voting Percentage of the Company,to approve
the sale,exchange or other disposition of all,or substantially all,of the Company's assets which is to
occur as part of a single transaction or plan.
6.5 Company Books. In accordance with Paragraph 12.3 herein, the Manager shall
maintain and preserve, during the term of the Company, and for five (5) years thereafter, all
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1984472.3
accounts, books, and other relevant Company documents. Upon reasonable request,each Member
shall have the right,during ordinary business hours,to inspect and copy such Company documents at
the Member's expense.
6.6 Priority and Return of Capital. No Member shall have priority over any other
Member, either as to the return of Capital Contributions or as to Distributable Cash; provided that
this Paragraph 6.6 shall not apply to loans (as distinguished from capital contributions) which a
Member has made to the Company.
6.7 Certificates of Interest. Members may be issued Certificates of Interest evidencing
their status as Members of the Company.
6.8 Meetings of Members.
(a) Annual Meeting. The holders of at least ten percent (10%) of Class A
Membership Interests may,but shall not be required to, call an annual meeting of the Members of
the Company,for the appointment of manager(s)and for the transaction of such other business as
may properly be brought before such meeting,which will be held at the Company's principal place
of business or at such other place, either within or without the State of Colorado, as may be
designated by the Manager and specified in the notice of such meeting.
(b) Special Meetings. Special meetings of the Members of the Company may be
held on any day, when called by the Manager, or by any Class A Member, or group of Class A
Members, who has, or in the aggregate have, at least a forty percent (40%) Voting Percentage.
Upon written request delivered either in person or by certified mail,return receipt requested,to any
Manager by any Member entitled to call a meeting of Members,the Manager shall forthwith cause
notice to be given to the Members entitled to such notice. The meeting must be held on a date not
less than ten(10)nor more than sixty(60)days after the receipt of such request,as the Manager or
Members may fix. If such notice is not given within twenty(20) days after the delivery or mailing
of such request,the person or persons calling the meeting may fix the time of the meeting and give
notice thereof in the manner provided for by law or this Operating Agreement,or cause such notice
to be given by any designated representative. Each special meeting shall be called to convene
between 8:00 a.m. and 6:00 p.m., and shall be held at the principal office of the Company.
(c) Notice of Meetings.Not less than ten(10)nor more than sixty(60)days before
the date fixed for a meeting, written notice stating the time and place of the meeting(and, in the
case of a special meeting,the purposes of such meeting)shall be given. The notice shall be sent by
personal delivery or by certified mail,return receipt requested,to each Member entitled to notice of
the meeting who is a Member of record as of the day preceding the day on which notice is given,
or, if a record date is duly fixed, as of that date. If mailed, the notice shall be addressed to the
members at their respective addresses as they appear in the records of the Company.
(d) Quorum. Except as may otherwise be provided by law, the Articles of
Organization, or this Operating Agreement, at any meeting of the Members, in order to have a
Quorum,the Members holding a majority of the Voting Percentage must be present in person or by
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proxy.
(e) Proxies. Class A Members entitled to vote may vote in person or by proxy.The
person appointed as proxy need not be a Class A Member. Unless the writing appointing a proxy
otherwise provides, the presence at a meeting of the person who appointed a proxy shall not
operate to revoke the appointment.Notice to the Company,in writing or in open meeting, of the
revocation of the appointment of a proxy shall not affect any vote or action previously taken or
authorized.
(0 Action By Majority. Except as otherwise provided elsewhere in this Operating
Agreement or where a larger Voting Percentage may be otherwise specifically required by law or
the Articles of Organization, the affirmative vote of a majority of the Voting Percentage cast by
Class A Members present at a meeting at which a quorum is present shall be required in order to
approve any resolution voted on at such meeting. Each Class A Member shall be entitled to the
Voting Percentage designated on Exhibit A, as amended from time to time.
(g) Action By Written Consent. Any action required by the Class A Members to be
taken at a meeting of the Class A Members of the Company or any action which may be taken at a
meeting of the Members, may be taken without a meeting if consent in writing, setting forth the
action so to be taken shall be signed by the Class A Members entitled to vote with respect to the
subject matter thereof,having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting.
6.9 Cessation of Membership.
(a) A Member shall cease to be a Member of the Company upon the happening of
any of the events set forth in the Colorado Act. In addition,a Member shall cease to be a Member
of the Company upon the happening of any of the following events:
(i) The death of an individual Member;
(ii) Any Interests held by a Member are involuntarily sold,transferred or
otherwise disposed of, whether by judicial decree, sale upon execution, foreclosure of any lien or
charge (including any disposition pursuant to a foreclosure or power of sale in connection with a
pledge or hypothecation of Interests of the Company), or by acquisition of any interest therein by a
trustee in bankruptcy, or the guardian or conservator of an incompetent Member;
(iii) The sale, transfer, exchange, or assignment of all of a Member's
Interests pursuant to Article 9;
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1984472.3
(iv) With respect to a corporate Member, the voluntary or involuntary
dissolution, liquidation or winding up of the business of such corporation, or the filing of
bankruptcy under Chapter 7 of the United States Bankruptcy Code, unless corrected within thirty
(30) days of the date the Corporate Member receives notice of such dissolution(or such later date
as may be agreed to by the Members);
(v) The Member fails to make an additional capital contribution
authorized by the Members holding a majority of the Voting Percentage;
(b) The Members all hereby agree that an Economic Interest Owner or withdrawn
Members shall not be entitled to demand or receive a distribution of their Interest in the Company,
except pursuant to the dissolution and liquidation of the Company;
ARTICLE 7
CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS
7.1 Members' Capital Contributions. Each such Member's Initial Capital Contribution
shall be such amount as is set forth on Exhibit A attached hereto. For persons becoming a Member
after the date of the execution of this Operating Agreement, such Member's Capital Contribution
shall be such amount as such Member contributed to the Company in exchange for his Interest.
7.2 Value. The Capital Contribution of the Members shall be made in whole or in part in
the form of cash, property, or services actually rendered to the Company. The fair market value of
any property and services shall be determined by mutual agreement of the contributing Member and
the Company.
7.3 Capital Accounts.
(a) A separate Capital Account will be maintained for each Member. Each
Member's Capital Account will be increased by (1) the amount of money contributed by such
Member to the Company;(2)the fair market value of property contributed by such Member to the
Company(net of liabilities secured by such contributed property that the Company is considered to
assume or take subject to under Section 752 of the Code); (3) allocations to the account of such
Member of Company income and gain;and(4)allocations to such Member of income described in
Section 705(a)(1)(B) of the Code. Each Member's Capital Account will be decreased by(1)the
amount of money distributed to such Member by the Company; (2) the fair market value of
property distributed to such Member by the Company(net of liabilities secured by such distributed
property that such Member is considered to assume or take subject to under Section 752 of the
Code); (3) allocations to such Member of expenditures described in Section 705(a)(2)(B) of the
Code; and(4) allocations to the account of such Member of Company loss and deduction taking
into account adjustments to reflect book value.
(b) In the event of a permitted sale or exchange of an Interest in the Company,the
Capital Account of the transferor shall become the Capital Account of the transferee to the extent it
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1984472.3
relates to the transferred interest. No Code Section 754 election shall be made with respect to any
transfer except at the discretion of the Managers and no transferee of an Interest in the Company
shall have the right to require such election.
(c) The manner in which Capital Accounts are to be maintained pursuant to this
Paragraph 7.3 is intended to comply with the requirements of Code Section 704(b) and the
Treasury Regulations promulgated thereunder. If in the opinion of the Company's tax lawyers
and/or tax accountants the manner in which Capital Accounts are to be maintained pursuant to the
preceding provisions of this Paragraph 7.3 should be modified in order to comply with Code
Section 704(b) and the Treasury Regulations thereunder, then notwithstanding anything to the
contrary contained in the preceding provisions of this Paragraph 7.3,the method in which Capital
Accounts are maintained shall be so modified; provided,however,that any change in the manner
of maintaining Capital Accounts shall not materially alter the economic agreement between or
among the Members.
(d) Subject to the provisions of Paragraph 11.3, upon liquidation of the Company
(or any Member's interest), liquidating distributions will be made in accordance with the positive
Capital Account balances of the Members, as determined after taking into account all Capital
Account adjustments for the Company's taxable year during which the liquidation occurs.
Liquidation proceeds will be paid within sixty(60)days of the end of the taxable year(or,if later,
within ninety (90) days after the date of the liquidation).
(e) Except as otherwise required in the Colorado Act and as specifically required
herein,no Member shall have any liability to restore all or any portion of a deficit balance in such
Member's Capital Account.
7.4 Withdrawal or Reduction of Members' Contributions to Capital.
(a) A Member shall not receive out of the Company's property any part of such
Member's contributions to capital until all liabilities of the Company,except liabilities to Members
on account of their Capital Contributions, have been paid or there remains property of the
Company sufficient to pay them.
(b) A Member, irrespective of the nature of his contribution, has only the right to
demand and receive cash in return for such Member's Capital Contribution.
7.5 Interest On and Return of Capital Contributions. No Member shall be entitled to
interest on such Member's Capital Contribution or to the return of such Member's Capital
Contribution, except as otherwise specifically provided for herein.
7.6 Additional Capital Contributions. If authorized by the Class A Members holding a
majority of the Voting Percentage,the Manager shall have the right to call upon and to demand that
all of the Members and any Economic Interest Owners make such additional cash contributions to
the Company's capital as authorized by the Class A Members holding a majority of the Voting
Percentage. Such capital contributions must be made within ten(10)business days after the date of
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1984472.3
the call. If a Member fails to make the additional capital contribution,the Member shall cease to be
a Member and shall become an Economic Interest Owner. If any Member or Economic Interest
Owner fails to make the additional capital contribution, the other Members may, if they so elect,
make part or all of such unpaid capital contribution in any proportion as to which they shall mutually
agree,and if no such agreement shall be made,each Member shall have the right to make its pro rata
share of such contribution,based on its P&L Percentage in proportion to the total P&L Percentage
of those Members making the additional capital contribution. Such additional capital contribution
shall be made within ten(10) business days after the end of the ten(10)business days in which the
other Member or Economic Interest Owner failed to make the additional capital contribution. Any
additional capital contributions shall result in an immediate adjustment to the Capital Accounts of
the Members and Economic Interest Owners.
ARTICLE 8
ALLOCATIONS, DISTRIBUTIONS, INCOME TAX ELECTIONS AND REPORTS
8.1 Allocations of Items. Except as otherwise provided in this Operating Agreement and
any schedule or exhibit attached hereto relating to guaranteed payments pursuant to Section 707(c)of
the Code,the net income or loss of the Company and each item of income,gain, loss,deduction,or
credit for each accounting tax year shall be allocated among the Members in accordance with their
respective P&L Percentages. For tax purposes,net income and loss,and each item thereof,shall be
allocated first as required by Section 704(c) of the Code, and thereafter in accordance with the
allocations for book purposes.
8.2 Distributions. The Company shall distribute its Distributable Cash at such times and
in such aggregate amounts as the Manager may,from time to time,determine. If any distributions of
Distributable Cash are made, then they shall be made among the Members as follows:
(a) Any distributions of Distributable Cash shall be distributed to the Members in
accordance with the Member's respective P&L Percentages. The Manager shall distribute a
minimum amount of Distributable Cash to provide the Members cash with which to pay their
personal or corporate income taxes on their distributive shares of income in excess of any prior
losses,the Company shall distribute,from its Distributable Cash,cash to the Members in each year
in which the Members' allocable percentage of the Company's positive taxable income exceeds the
aggregate balance of the Members' allocable percentage of all Company losses previously
allocated to the Members.
8.3 Limitation Upon Distributions. No distribution shall be declared and paid unless,
after the distribution is made, the assets of the Company are in excess of all liabilities of the
Company, except liabilities to Members on account of their contributions.
8.4 Special Allocation Provisions. The following allocations and chargebacks during a
fiscal year of the Company shall be made prior to any other allocations provided for in this Article 8
for such fiscal year:
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(a) Definitions. For purposes of this Paragraph 8.4,the following terms shall have
the following meanings:
(i) A"Company Liability"means any enforceable debt or obligation for
which the Company is liable or that is secured by any Company property.
(ii) A"Company Minimum Gain"means an amount determined by first
computing for each Company Nonrecourse Liability any gain the Company would
realize if it disposed of the Company property subject to that liability for no
consideration other than full satisfaction of the liability and then aggregating the
separately computed gains. The amount of the Company Minimum Gain includes
minimum gain arising from a conversion, refinancing, or other change to a debt
instrument, only to the extent a Member is allocated a share of that minimum gain.
For any taxable year, the net increase or decrease in Company Minimum Gain is
determined by comparing the Company Minimum Gain on the last day of the
immediately preceding taxable year with the Minimum Gain on the last day of the
current taxable year. Notwithstanding any provision to the contrary contained herein,
Company Minimum Gain and increases and decreases in Company Minimum Gain
are intended to be computed in accordance with Code § 704 and the regulations
issued thereunder, as the same may be issued and interpreted from time to time. A
Member's share of Company Minimum Gain at the end of any taxable year equals:
The sum of nonrecourse deductions allocated to that Member(and to that Member's
predecessors in interest) up to that time, and the distributions made to that Member
(and to that Member's predecessors in interest) up to that time of proceeds of a
nonrecourse liability allocable to an increase in Company Minimum Gain,minus the
sum of that Member's (and that Member's predecessors in interest) aggregate share
of the net decreases in Company Minimum Gain, plus their aggregate share of
decreases resulting form revaluations of Company property subject to one or more
Company Nonrecourse Liabilities.
(iii) A "Company Nonrecourse Liability" is a Company Liability to the
extent that no Member or Related Person bears the economic risk of loss(as defined
in Treas. Reg. § 1.752-2)with respect to the liability.
(iv) "Member Minimum Gain" means an amount determined by first
computing for each Member Nonrecourse Liability any gain the Company would
realize if it disposed of the Company property subject to that liability for no
consideration other than full satisfaction of the liability and then aggregating the
separately computed gains. The amount of the Member Minimum Gain includes
minimum gain arising from a conversion, refinancing, or other change to a debt
instrument, only to the extent the Member is allocated a share of the minimum gain.
For any taxable year, the net increase or decrease in Member Minimum Gain is
determined by comparing the Member Minimum Gain on the last day of the
immediately preceding taxable year with the Minimum Gain on the last day of the
current taxable year. Notwithstanding any provision of the contrary contained herein,
Member Minimum Gain and increases and decreases in Member Minimum Gain are
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1984472.3
intended to be computed in accordance with Code § 704 and the regulations issued
thereunder, as the same may be issued and interpreted from time to time.
(v) "Member Nonrecourse Liability"means any Company Liability to the
extent the liability is nonrecourse under state law,and on which a Member or Related
Person bears the economic risk of loss under Treas. Reg. § 1.752-2 because, for
example, the Member or Related Person is a creditor or guarantor.
(vi) "Nonrecourse Liabilities"include Company Nonrecourse Liabilities
and Member Nonrecourse Liabilities.
(vii) An "Offsetable Decrease" means any allocation that unexpectedly
causes or increases a deficit in the Member's capital account as of the end of the
taxable year to which the allocation related, attributable to depletion allowances
under Treas. Reg. § 1.704-1(b)(2)(iv)(k), allocation of loss and deductions under
Code § 704(e)(2)or 706 or under Treas. Reg. 1.751-1,or distributions that,as of the
end of the year, are reasonably expected to be made to the extent they exceed the
offsetting increases to the Member's capital account that reasonable are expected to
occur during or before the taxable years in which the distributions are expected to be
made (other than increases pursuant to a Minimum Gain Chargeback).
(viii) A"Related Person"is a person having a relationship to a Member that
is described in Treas. Reg. 1.752-4(b).
(b) Company Minimum Gain Chargeback. If there is a net decrease in Company
Minimum Gain for a taxable year,each Member must be allocated items of income and gain
for that taxable year equal to that Member's share of the net decrease in Company Minimum
Gain. A Member's share of the net decrease in Company Minimum Gain is the amount of
the total net decrease multiplied by the Member's percentage share of the Company
Minimum Gain at the end of the immediately preceding taxable year. A Member's share of
any decrease in Company Minimum Gain resulting from a revaluation of Company property
equals the increase in the Member's capital account attributable to the revaluation to the
extent the reduction in minimum gain is caused by the revaluation. A Member is not subject
to the Company Minimum Gain Chargeback requirement to the extent the Member's share of
the net decrease in Company Minimum Gain is caused by a guarantee,refinancing, or other
charge in the debt instrument causing it to become partially or wholly a recourse liability or a
Member Nonrecourse Liability,and the Member bears the economic risk of loss(within the
meaning of Treas. Reg. § 1.752-2) for the newly guaranteed, refinanced, or otherwise
changed liability.
(c) Member Minimum Gain Chargeback. If during a taxable year there is a net
decrease in Member Minimum Gain, any Member with a share of that Member Minimum
Gain(as determined under Teas. Reg. § 1.704-2(i)(5))as of the beginning of that taxable year
must be allocated items of income and gain for that taxable year (and, if necessary, for
succeeding taxable years)equal to that Member's share of the net decrease in the Company
Minimum Gain. A Member's share of the net decrease in Member Minimum Gain is
15
1984472.3
determined in a manner consistent with the provisions of this Operating Agreement. A
Member is not subject to this Member Minimum Gain Chargeback,however to the extent the
net decrease in Member Minimum Gain arises because the liability ceased to he a Member
Nonrecourse Liability due to a conversion, refinancing, or other change in the debt
instrument that causes it to become partially or wholly a Company Nonrecourse Liability.
The amount of that otherwise would be subject to the Member Minimum Gain Chargeback is
added to the Member's share of Company Minimum Gain. In addition,rules consistent with
those applicable to Company Minimum Gain shall be applied to determine the shares of
Member Minimum Gain and Member Minimum Gain Chargeback to the extent provided
under the regulations issued pursuant to Code § 704(b).
(d) Qualified Income Offset. In the event any Member, in that capacity,
unexpectedly receives an Offsetable Decrease, the Member shall be allocated items of
income and gain(consisting of a prorata portion of each item of Company income and gain
for such year) in an amount and manner sufficient to offset the Offsetable Decrease as
quickly as possible.
(e) Other Allocations of Income or Gain. Special allocations of income and gain
will be made to any Member if the Managers determine that such Member's capital account
would otherwise have a deficit capital account balance that exceeds the maximum deficit
balance that would be permitted under the regulations promulgated under Code Section
704(b).
(f) Limit on Loss Allocations. If any allocation of loss or deduction would result in
a deficit balance in a Member's capital account that would exceed the maximum deficit
balance would be permitted under the regulations promulgated under Code Section 704(b),
some or all of such loss or deduction may be reallocated to any other Members whose capital
accounts would not have such excess deficit balances (in proportion to their respective
capital accounts).
(g) Purpose of Regulatory Allocations. The allocations set forth in the foregoing
provisions in this Paragraph 8.4(the"Regulatory Allocations")are intended to comply with
certain requirements of Treas. Reg. § 1.704-1(b) and § 1.704-2. If any Regulatory
Allocations are made pursuant to this Operating Agreement, the Managers may take such
Regulatory Allocations into account in making subsequent allocations of income,gain,loss
or deduction, and may make such further special allocations as may be necessary or
appropriate so as to prevent or minimize the Regulatory Allocations from distorting the
economic interests of the Members herein which would otherwise result but for the
application of the Regulatory Allocations.
ARTICLE 9
RESTRICTIONS ON TRANSFERABILITY
9.1 Restrictions.
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1984472.3
(a) Except as to any Exempt Transfer,as defined herein,any and all sales,transfers,
or assignments of all or any portion of a Member's Interest, shall be subject to the provisions of
this Article 9. As used herein,the term Exempt Transfer shall mean the transfer of any or all Class
A or a Class B Member's interest during such Member's lifetime by gift or on the Member's death
by will or intestacy to a person or persons in the Class A or Class B Member's Immediate Family
(as defined herein) or to a trust for the benefit of the Member or a person or persons in the
Member's Immediate Family,provided that each transferee or other recipient agrees in a writing
satisfactory to the Manager that the provisions of this Article 9 will continue to apply to the
transferred Member's Interest in the hands of such transferee or other recipient. As used herein,
the term Immediate Family shall mean the Member's spouse,the father,mother,brother or sister,
child, adopted child, grandchild, adopted grandchild, other descendant or adopted descendant of
the Member or the Member's spouse, or the spouse of any child, adopted child, grandchild,
adopted grandchild, other descendant or adopted descendant of the Member or the Member's
spouse.
(b) The purchaser, transferee, or assignee of a Selling Member's Interest shall not
become a Substitute Member unless the non transferring Class A Members holding a majority of
the Voting Percentage of the non transferring Members approve such purchaser, transferee, or
assignee as a Substitute Member. If such purchaser, transferee, or assignee is not approved as a
Substitute Member, such purchaser, transferee or assignee shall be deemed to be an"Economic
Interest Owner". If at the time of the purchase, transfer, or assignment, the Company does not
have more than one (I) Member, the purchaser, transferee, or assignee of a Selling Member's
Interest shall become a Substitute Member upon approval of the Manager.
(c) An Economic Interest Owner shall have a Capital Account and shall have the
same economic rights and obligations as a Member,including participation in the allocation of net
income, gain, loss, deduction or credit and other allocations, participation in calls for additional
Capital Contributions, and participation in cash distributions and liquidation distributions.
However,an Economic Interest Owner shall not have any voting rights,shall not attend Members'
Meetings,shall not have access to Company books,records or documents,and shall not participate
in the purchase of Option Interests provided to Members in this Article 9.
(d) All Certificates of Interest shall contain a notice that generally provides that the
Certificate is subject to the provisions and restrictions of that certain Operating Agreement entered
into by and among the Company and its Members and may only be sold,encumbered,assigned or
otherwise transferred in accordance with the provisions of the Operating Agreement, a copy of
which is on file in the offices of the Company.
9.2 Creation of Option. The occurrence of any of the following shall be deemed an
"Option Event":
(a) A Member shall desire to sell,donate,transfer,or otherwise voluntarily dispose
of any Interest now or hereafter owned or held by such Member, in any manner whatsoever;
(b) Any Interest held by a Member shall be involuntarily sold, transferred, or
17
1984472.3
otherwise disposed of, whether by judicial decree, sale upon execution, foreclosure of any lien or
charge(including any disposition pursuant to a foreclosure or power of sale in connection with a
pledge or hypothecation of Interest of the Company),or by acquisition of any interest therein by a
trustee in bankruptcy, or the guardian or conservator of an incompetent Member;
(c) A Member which is an entity such as a corporation shall forfeit its charter
(which forfeiture is not duly and promptly rescinded),be dissolved or cease to exist for any reason,
or file for protection under the Bankruptcy Laws;
(d) A Member shall die and the desired transfer is not an Exempt Transfer(in which
event such Member and such Member's personal representative,whenever appointed,shall both be
treated as one and the same for the purposes of this Operating Agreement);
Upon the occurrence of an Option Event,the other parties to this Operating Agreement shall
have the option to acquire all of the Interests owned by the Member upon any of the Option Events
as hereinafter set forth in this Operating Agreement; provided, however, that as to Option Events
specified in Paragraphs 9.2(a) or 9.2(b), only the portion of the Interests actually affected by the
occurrence of any of the events shall be subject to the option. The Interests subject to the option(s)
granted herein are sometimes referred to as the "Option Interests."
9.3 Options.
(a) Upon receipt of a notice of the occurrence of any Option Event relating to the
Interest owned by any Member, the Company must immediately notify all other Members (the
"Remaining Members"). Within thirty (30) days after the receipt of such notice, the Members
other than the Member involved in the occurrence of the Option Event may exercise an option to
purchase all or part of the Option Interests in the proportion that the number of Interests owned by
each Remaining Member at the time of the receipt of the notice of the occurrence of the Option
Event bears to the total number of Interests then owned by all of the Remaining Members,for the
price and upon the terms hereinafter provided. If not all of the Option Interests are purchased
pursuant to the provision set forth in the preceding sentence, any Remaining Member who is
granted and who exercises in full such Member's pro rata option may,within ten (10) days after
the expiration of the thirty(30)day option period provided for in the preceding sentence,exercise
an option to purchase the remaining Option Interests to which the other Remaining Members have
failed to exercise their option.
(b) If the Remaining Members do not exercise their option to purchase all or any
portion of such Interests, then the Company,within sixty(60)days of the receipt of the notice of
the Option Event may exercise an option to purchase the uppercased Option Interests for the price
and upon the other terms hereinafter provided.
(c) Notwithstanding the foregoing,the Company and the Remaining Members may
by agreement among themselves determine the proportions in which some or all of their number
may exercise the option granted in this Paragraph.
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1984472.3
9.4 All or None Option Exercise. The Company and the Remaining Members must in the
aggregate exercise their options to purchase all of the Option Interests or they shall forfeit their
options.
9.5 Failure to Exercise All Options. In the event any options arise hereunder and the
Company and the Remaining Members waive their options or fail to exercise their options within the
time provided with respect to all of the Option Interests, then,
(a) in the event of options arising under Paragraph 9.2(a)hereof,the Member may
transfer the Option Interests to the transferee named in the notice required by Paragraph 9.6(a)
hereof and upon the terms therein stated within ten (10) days after the expiration of the option
periods, which Option Interests, when so transferred, shall remain subject to the terms of this
Operating Agreement;
(b) in the event of options arising under Paragraphs 9.2(b), and 9.2(c) hereof, the
Option Interests,after the expiration of the option periods, shall, in the hands of the transferee or
the Member, as the case may be, remain subject to the terms of this Operating Agreement; and
(c) in the event of options arising under Paragraph 9.2(d) hereof because of a
Member's death,after the expiration of the option periods,such Option Interests may be disposed
of pursuant to such Member's will or other controlling instrument or the laws of descent and
distribution,as the case may be,which Option Interests,when so transferred,shall remain subject
to the terms of this Operating Agreement.
No transfer under Paragraph 9.5(a) hereof shall be valid if the transfer is not made
within the aforesaid ten (1 0) day period or is not upon the terms and conditions to the transferee
stated in the notice required of the Member by Paragraph 9.6(a). In such a case,the Option Interests
shall remain subject to this Operating Agreement. In the event that a Member reacquires all or any
portion of the transferred Option Interests,the Interests shall be subject to this Operating Agreement
as if no transfer had been made.
9.6 Member Notice.
(a) Upon the occurrence of any event described Paragraphs 9.2(a) or 9.2(b) or
9.2(c), the Member (or its successor in the case of corporate dissolution, etc) shall immediately
notify the other parties to this Operating Agreement of such occurrence,including(i)the terms and
conditions of any proposed disposition, (ii) the price offered or paid for the Interests subject to
such option, (iii)the number of Interests to be disposed of; and(iv)the names and the business and
residence addresses of the Person or Persons who propose to acquire or have acquired said
Interests.
(b) In the case of the death of a Member as described in Paragraph 9.2(d)hereof,
then if a personal representative is appointed for such Member's estate, such personal
representative shall,within thirty(30)days following such personal representative's appointment,
give notice of such personal representative's appointment to the other parties to this Operating
19
1984472.3
Agreement, or if a probate estate is not opened for the Member, then the trustee of any trust to
which the Interests have been transferred, if any, shall, within thirty (30) days of the Member's
death, give notice to the other panics to this Operating Agreement of such personal
representative's service as trustee. The personal representative(or other successor-in-interest)of a
deceased or incompetent Member shall succeed to the deceased Member's Economic Interest in
the Company. However,such personal representative(or other successor-in-interest)shall not be
entitled to be admitted as a Member without the affirmative vote of the remaining Members
holding a majority of the Voting Percentage of the remaining Members.
9.7 Purchase Price.
(a) If the Option Event is a proposed sale, pursuant to a firm, bona fide offer
pursuant to Paragraph 9.2(a),the purchase price for the Option Interests shall be equivalent to the
price offered by the proposed purchaser to the Member.
(b) If a Member withdrawals from the Company anytime within three (3) years
from the date of this Operating Agreement or the date such Member acquires his or her interest,the
purchase price for such Member's interest shall be equivalent to fifty percent(50%)of the value of
the Option Interests owned by such Member as determined in the most recent Appraisal,as defined
herein. If a Member withdrawals from the Company anytime after three(3)years from the date of
this Operating Agreement or the date such Member acquires his or her interest,the purchase price
for such Member's interest shall be equivalent to one hundred percent(100%)of the value of the
Option Interests owned by such Member as determined in the most recent Appraisal of the
Members. As used herein, the term Appraisal shall mean an appraisal determined as follows:
(i) The Manager shall choose a qualified appraiser to determine the value
of the Option Interests. A qualified appraiser shall be one that is certified and experienced in doing
appraisals and is well familiar with value of such type and kind Company assets and percentage
interests in the Company. The Manager may select one or more qualified appraisers. The
Manager,in his sole discretion,may determine that any appraisal conducted shall be binding as to
the fair market value of the Option Interests,and the Members shall have no rights to dispute such
appraisal.
(c) If a Member dies, the purchase price for the Option Interests shall be equivalent
to the value of the Option Interests owned by such Member as determined in the most recent
Appraisal.
(d) For all other transfers not covered by the provisions of this Paragraph 9.7, the
purchase price for the Option Interests of the Company shall be the value of such Option Interests
thereof as determined in the most recent Appraisal.
9.8 Payment. Unless otherwise agreed in writing by the selling and purchasing parties,
the purchase price shall be paid as follows:
(a) The purchase price for Interests shall be paid in full at closing or at the option of
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each purchasing party;however,the purchase price may be deferred in accordance with Paragraph
9.8(b).
(b) The deferred portion of the purchase price, if any, shall be evidenced by the
promissory note of the purchasing party made payable to the order of the selling party. The
promissory note shall bear interest at the minimum rate allowed by Sections 483 and 1274 of the
Internal Revenue Code of 1986, as amended,and the regulations promulgated thereunder without
bearing any unstated or imputed interest, in effect on the date of the promissory note. The
promissory note shall be payable with 10% of the purchase price due at Closing and remaining
amount shall be payable in no more than five(5)equal annual installments of principal and interest
commencing on the first day of each year immediately following the closing. The promissory note
shall be secured by each purchasing party's pledge to the payee of the Certificate of the Interest
evidencing the Interests purchased.
9.9 Interests Delivered Unencumbered. All Interests purchased by the purchasing parties
hereunder shall be delivered to them free and clear of all liens,claims,and encumbrances,excepting
only those for which provision is expressly made in this Operating Agreement, and said Interests
shall be transferred on the books of the Company. In the event any of the Interests to be purchased
hereunder are subject to any lien, encumbrance or claim, the Company and the remaining parties to
this Operating Agreement may at their election:
(a) postpone payment of the purchase price for such Interests until such time as the
lien, encumbrance or claim has been discharged, but, in such case, the Interests shall be
immediately transferred of record to the Company and the remaining parties to this Operating
Agreement, as the case may be; or
(b) in lieu of and in satisfaction of the purchase price for such Interests, either: (i)
disburse directly to such lienholder, encumberer or claimant, if the amount of such claim be
liquidated,such part of the purchase price as may be adequate to discharge such lien,encumbrance
or claim, or(ii) in the event that any such lien, encumbrance or claim is in excess of the purchase
price hereunder, then the Company and the remaining parties to this Operating Agreement may,
but shall not be obligated, to disburse the purchase price to such lienholder, encumberer or
claimant; and upon the occurrence of the action described in either subsection(i)or(ii)hereof,any
lien,encumbrance or charge against such Interests shall be fully released and discharged and such
Interests shall be transferred in the name of the Company and the remaining parties to this
Operating Agreement, as the case may be, free and clear of all liens, encumbrances, charges and
claims.
9.10 Exercise and Nonexercise of Option. Any options herein granted shall apply to,and
be exercisable upon, the occurrence of any applicable event specified herein, and the failure to
exercise or the waiver of any of such options shall not waive any of the rights with respect to any
other subsequent options. The options conferred herein shall be exercisable successively and without
limitation upon any subsequent occurrence of any event giving rise to options whether with respect
to the same or other Interests owned by a Member,such Member's personal representative,or their
successors in interest,notwithstanding that such personal representative or successors in interest may
21
1984472.3
have acquired the subject Interests subsequent to the date of this Operating Agreement and whether
or not said Interests were newly acquired, reacquired, or continuously held by a Member, such
Member's personal representative, or their successors in interest.
ARTICLE 10
ADDITIONAL MEMBERS
From the date of the formation of the Company,additional Members may be added only in
accordance with Article 9 or this Article 10. Except for transfers and assignments of Interests in
accordance with Article 9, any Person or Entity approved by the affirmative vote of the Class A
Members holding a majority of the Voting Percentage may become a Member in this Company by
the sale of new Company Interests for such consideration as determined by the affirmative vote of
the Class A Members holding a majority of the Voting Percentage,or as a transferee of a Member's
Interest or any portion thereof,subject to the terms and conditions of this Operating Agreement. No
new Members shall be entitled to any retroactive allocation of losses,income or expense deductions
incurred by the Company. All of the Members may, at their option, at the time an Additional
Member is admitted, close the Company books (as though the Company's tax year had ended) or
make pro rata allocations of loss, income and expense deductions to an Additional Member for that
portion of the Company's tax year in which an Additional Member was admitted in accordance with
the provisions of Section 706(d)of the Code and the Treasury Regulations promulgated there under.
ARTICLE 11
DISSOLUTION AND TERMINATION
11.1 Dissolution.
(a) The Company shall be dissolved upon the occurrence of any of the following
events:
(i) by the unanimous written agreement of all Class A Members; or
(ii) upon the entry of a judicial decree of dissolution.
(b) The death, incompetence, retirement, resignation, expulsion, bankruptcy or
dissolution of any Member or the occurrence of any other event that terminates the continued
membership of any Member(a"Withdrawal Event")shall not cause the Company to be dissolved
or its affairs to be wound up, and upon the occurrence of any such Withdrawal Event, the
Company shall be continued without dissolution, unless within ninety (90) days following the
occurrence of such Withdrawal Event, the remaining Class A Members of the Company by a
majority of the remaining Class A Members of the Company agree in writing to dissolve the
Company.
(c) Notwithstanding anything to the contrary in this Operating Agreement, if a
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1984472.3
Class A Member or Members owning Interests which in the aggregate constitute not less than a
majority of the Voting Percentage of the Company vote to dissolve the Company at a meeting of
the Members of the Company,then all of the Class A Members shall agree in writing to dissolve
the Company as soon as possible thereafter.
(d) As soon as possible following the occurrence of any of the events requiring the
dissolution of the Company, the appropriate representative of the Company shall execute a
statement of intent to dissolve in such form as shall be prescribed by the Colorado Secretary of
State and file same with the Colorado Secretary of State's office.
11.2 Effect of Filing of Dissolving Statement. Upon the filing by the Colorado Secretary
of State of a statement of intent to dissolve,the Company shall cease to carry on its business,except
insofar as may be necessary for the winding up of its business, but its separate existence shall
continue until a certificate of dissolution has been issued by the Secretary of State or until a decree
dissolving the Company has been entered by a court of competent jurisdiction.
11.3 Winding Up, Liquidation and Distribution of Assets.
(a) Upon the filing of a statement of intent to dissolve, the Members shall make a
final accounting of the business and affairs of the Company and shall proceed with reasonable
promptness to liquidate the business, property and assets of the Company and to distribute the
proceeds thereof in the following order of priority:
(i) to those liabilities to creditors in the order of priority as provided by
law, except those liabilities to Members of the Company on account of their contributions; and
(ii) to those liabilities to Members of the Company on account of their
contributions.
(b) All gains or losses resulting from the dissolution(whether by sale of assets or
distribution in kind) of the Company shall be allocated among the Members in accordance with
the Member's P&L Percentage. After paying or discharging all of its obligations or making
adequate provision for the payment or discharge thereof, the Company shall distribute the
remainder of its assets, either in cash or in kind, among its Members according to their respective
positive capital account balances. If any Member shall have a negative capital account balance,
such Member shall not be required to pay such negative capital account balance to the Company.If
the Members elect to distribute the remaining property and assets of the Company in kind,in lieu
of selling them,the distribution shall be based upon the then existing fair market value thereof and
after allocating to the Members,in accordance with their respective,interests in the Company,any
unrealized gain inherent in such assets.
(c) The wind-up of the affairs of the Company shall be conducted by the Members.
In liquidating the assets of the Company,all tangible assets of a saleable value shall be sold at such
price and terms as the Members determine to be fair and equitable. Any Member may purchase
23
1984472.3
such assets at such sale. It shall not be necessary to sell any intangible assets of the Company. A
reasonable time shall be allowed for the orderly liquidation of the assets of the Company and the
discharge of liabilities to creditors to minimize the losses that might otherwise occur upon
liquidation. Upon the completion of winding up of the Company, articles of dissolution shall be
delivered to the Secretary of State for filing.
(d) Upon completion of the winding up, liquidation and distribution of the assets,
the Company shall be deemed terminated.
(e) The Manager shall comply with any applicable requirements of applicable law
pertaining to the winding up of the affairs of the Company and the final distribution of its assets.
11.4 Return of Contribution Non-Recourse to Other Members. Except as provided by law,
upon dissolution,each Member shall look solely to the assets of the Company for the return of such
Member's Capital Contribution. If the Company property remaining after the payment or discharge
of the debts and liabilities of the Company is insufficient to return the cash or other property
contribution of one or more Members,such Member or Members shall have no recourse against any
other Member, or any of the Company's Manager or officers.
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 Indemnification. The Company shall indemnify and hold harmless each Member,the
Manager, and all officers and directors of the Company (individually an "Indeinnitee") from and
against any and all losses, claims, demands, costs, damages, liabilities, expenses of any nature
(including attorney's fees and disbursements), judgments, fines, settlements, and other amounts
arising from any claims, demands, actions, suits, or proceedings (whether civil, criminal;
administrative, or investigative) in which an Indemnitee may be involved or threatened to be
involved, as a party or otherwise arising out of or incidental to the business of the Company.
Notwithstanding,nothing in the Paragraph shall limit any Indeinnitee from indemnification by the
Company to the fullest extent permitted by Colorado law.
12.2 Notices. Any notice, demand,or communication required or permitted to be given by
any provision of this Operating Agreement shall be deemed to have been sufficiently given or served
for all purposes if delivered personally to the party or to an executive officer of the party to whom
the same is directed or, if sent by registered or certified mail,postage and charges prepaid,addressed
to the Member's and/or Company's address, as appropriate, which is set forth in this Operating
Agreement. Except as otherwise provided herein,any such notice shall be deemed to be given three
business days after the date on which the same was deposited in a regularly maintained receptacle for
the deposit of United States mail, addressed and sent as aforesaid.
12.3 Books of Account and Records. Proper and complete records and books of account
shall be kept or shall be caused to be kept by the Managers and shall be entered fully and accurately
describe all transactions and other matters relating to the Company's business in such detail and
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completeness as is customary and usual for businesses of the type engaged in by the Company. Such
books and records shall be maintained as provided in Paragraph 6.5. The hooks and records shall be
at all times maintained at the office of the Manager of the Company and shall be open to the
reasonable inspection and examination of the Members or their duly authorized representatives
during reasonable business hours.
12.4 Accounting Period. The Company's accounting period shall be the calendar year.
12.5 Records,Audits and Reports. At the expense of the Company,the Manager(s)shall
maintain records and accounts of all operations and expenditures of the Company. At a minimum
the Company shall keep at its principal place of business the following records:
(a) A current list of the full name and last known residence, or mailing address of
each Member, both past and present;
(b) A copy of the Articles of Organization of the Company and all amendments
thereto, together with executed copies of any powers of attorney pursuant to which any amendment
has been executed;
(c) Copies of the Company's federal, state, and local income tax returns and
reports, if any,for the four most recent years or, if such returns and reports were not prepared for
any reason,copies of the information and records provided to,or which should have been provided
to,the Members to enable them to prepare their federal,state and local tax returns for such periods;
(d) Copies of the Company's past and currently effective written Operating
Agreements,copies of any writings permitted or required with respect to a Member's obligation to
contribute cash,property or services,and copies of any financial statements of the Company for the
three most recent years;
(e) Minutes of every annual, special, and court-ordered meeting; and
(f) Any written consents obtained from Members for actions taken by Members
without a meeting.
12.6 Taxed as a Partnership,Tax Returns and other Elections. The Company will elect to
be taxed as a partnership. The Manager shall cause the preparation and timely filing of all tax returns
required to be filed by the Company pursuant to the Code and all other tax returns deemed necessary
and required in each jurisdiction in which the Company does business. Copies of such returns, or
pertinent information therefrom, shall be furnished to the Members within a reasonable time after the
end of the Company's Fiscal Year. All elections permitted to be made by the Company under federal
or state laws shall be made by the Manager.
12.7 Application of Colorado Law. This Operating Agreement, and the application or
interpretation hereof, shall be governed exclusively by its terms and by the laws of the State of
Colorado and specifically the Colorado Act.
25
1984472.3
12.8 Waiver of Action for Partition. Each Member irrevocably waives during the term of
the Company any right that such Member may have to maintain any action for partition with respect
to the property of the Company.
12.9 Amendments. The Articles of Organization and this Operating Agreement may only
be amended by the Manager at anytime or upon majority vote of the Class Members.
12.10 Execution of Additional Instruments. Each Member hereby agrees to execute such
other and further statements of interest and holdings, designations, powers of attorney and other
instruments necessary to comply any laws, rules or regulations.
12.11 Construction. Whenever the singular number is used in this Operating Agreement
and when required by the context, the same shall include the plural, and the masculine gender shall
include the feminine and neuter genders and vice versa; and the word "Person" or "party" shall
include a corporate firm, partnership,proprietorship or other form of association.
12.12 Headings. The headings in this Operating Agreement are inserted for convenience
only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of
this Operating Agreement or any provision hereof.
12.13 Waivers. The failure of any party to seek redress for violation of or to insist upon the
strict performance of any covenant or condition of this Operating Agreement shall not prevent a
subsequent act, which would have originally constituted a violation, from having the effect of an
original violation.
12.14 Rights and Remedies Cumulative. The rights and remedies provided by this
Operating Agreement are cumulative and the use of any one right or remedy by any party shall not
preclude or waive the right to use any or all other remedies. Said rights and remedies are given in
addition to any other rights the parties may have by law, statute, ordinance or otherwise.
12.15 Severability. If any provision of this Operating Agreement or the application thereof
to any Person or circumstance shall be invalid,illegal or unenforceable to any extent,the remainder
of this Operating Agreement and the application thereof shall not be affected and shall be
enforceable to the fullest extent permitted by law.
12.16 Heirs, Successors and Assigns. Each and all of the covenants,terms,provisions and
agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and,
to the extent permitted by this Operating Agreement, their respective heirs, legal representatives,
successors and assigns.
12.17 Creditors. None of the provisions of this Operating Agreement shall be for the benefit
of or enforceable by any creditors of the Company.
12.18 Counterparts. This Operating Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which shall constitute one and the same instrument.
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1984472.3
12.19 Investment Representations. The undersigned Members understand: that the interests
evidenced by this Operating Agreement have not been registered under the Securities Act of 1933,or
any other securities laws (the"Securities Acts") because the Company is issuing these Interests in
reliance upon the exemptions from the registrations requirements of the Securities Acts providing for
issuance of securities not involving a public offering;that the Company has relied upon the fact that
the Interests are to be held by each Member for investment; and that exemption from registrations
under the Securities Acts would not be available if the Interests were acquired by a Member with a
view to distribution. Accordingly,each Member hereby confirms to the Company that such Member
is acquiring the Interests for such own Member's account, for investment and not with a view to the
resale or distribution thereof. Each Member agrees not to transfer, sell or offer for sale any portion
of the Interests unless there is an effective registration or other qualification relating thereto under the
Securities Act of 1933 and under any applicable state securities laws or unless the holder of Interests
delivers to the Company an opinion of counsel,satisfactory to the Company,that such registration or
other qualification under such Act and applicable state securities laws is not required in connection
with such transfer,offer or sale. Each Member understands that the Company is under no obligation
to register the Interests or to assist such Member in complying with any exemption from registration
under the Acts if such Member should, at a later date, wish to dispose of the Interest. Prior to
acquiring the Interests,each Member has made an investigation of the Company and its business and
all information with respect thereto which such Member needed to make an informed decision to
acquire the Interest has been made available to each such Member. Each Member considers himself
or itself to be a person possessing experience and sophistication as an investor which are adequate
for the evaluation of the merits and risks of such Member's investment in the Interest.
IN WITNESS WHEREOF,the parties have signed this Operating Agreement effective the date
first written above.
Ilarlat' Hankins
Harlan W. Hankins
27
•
1984472.3
EXHIBIT A
Class A Percentage Initial Capital Voting
Member Interest Contribution Percentage
Cash: $
Harlan W. Hankins 2% Other property valued at 100%
$
Class B Percentage Initial Capital Voting
Member Interest Contribution Percentage
Cash: $
Harlan P. Hankins 98% Other property valued at N/A
$
The Undersigned acknowledge that the foregoing is a correct statement as to each
Member named above,effective the 6th day of December, 2006. This Exhibit may be executed
in counterparts which taken together shall constitute one original.
Ifarla Hankins
0-C-a c.(..). 1,-C112..
Harlan W. Hankins
28
1984472.3
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